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Monetary and Fiscal Policy | The Economics Classroom: Workshop 7

The government has two main macroeconomic policy tools at its disposal to keep aggregate demand growing at roughly the same rate as potential GDP: fiscal policy, which is a fancy word for tax and spending policy, and monetary policy, which involves the Federal Reserve and consists of increasing or decreasing the money supply through open market operations, changes in the discount rate, and changes in reserve requirements. Changes in the money supply affect interest rates, and changes in interest rates affect investment, consumption, unemployment, inflation, and economic growth. Through lectures, simulations and exercises, this one hour video workshop addresses how the government tries to bring stability to the market.